What does 2004 have in store for manufacturing in America? Is this the year we've all been waiting for — the year that brings back the bounce in factory orders, the year that heats up industry hiring, the year that pumps up producer profits? The numbers sure say so.
Consider the stats: productivity growth rates are at a 20-year high, hitting 9.4 percent in the 3rd quarter of 2003. Another way of saying that is that manufacturing technology and systems are stupendously advanced compared with the recent past. Inflation is essentially zero. Interest rates are at levels not seen since the Eisenhower years and tax rates — compared with nearly all other industrialized countries — are moderate. Seems like the perfect scenario, the ideal setting for manufacturing success. Even with that one negative in the picture — the continuing outsourcing of work to places like China, India and Mexico — the outlook has got to be good, if not downright tremendous.
So why aren't we hearing the sounds of a terrific increase in factory use rates, hovering as they are now below 80 percent. Why aren't we reading about major hiring and rehiring at the nation's industrial plants and job shops? Maybe the economy's manufacturing core is becoming more and more like its farm sector — that is, fewer and fewer people work on farms and produce more and more due to equipment and management advances. Ditto in industry?
Maybe industrial managers are just too cautious about hiring and inventory growth these days. Or, maybe all those jobs being created in China and India are many of those that would have been formed over here? Let's not begrudge those Third World nations that are trying to join the manufacturing and free enterprise club. The question of level playing fields, however, is a real problem and we need to negotiate fairly and hard on those issues. But, while we can applaud the spread of free enterprise and successful manufacturing all over the world, we need to be on guard against one truly dangerous idea. That's this: maybe we really are becoming a service economy.
Those of you who have been reading my column for more that a few months know what I think of that last idea. The service economy myth is the most damaging flim-flam nonsense we've ever had to deal with. It amazes me that there are still people in America who seriously believe we can survive and thrive on farming and "service industries" alone. Try to imagine a great America that is not a great manufacturing country. I can't.
So where is the sound of a great industrial economy recovering from recession? Where is the rejoicing attitude? Where is the celebration? Here is my answer: give it time. America is still digesting enormous financial and dot com scandals that have cost individuals billions. We're in a war, a costly one with a great deal of uncertainty.
These issues, I believe, are weighing on us in terms of mood and expectations. However, as we proceed through this new year, I believe more and more of us will recognize once again that the reasons so many millions of people are trying to move to our magnificent country, legally and illegally, are the very reasons for our own well-tutored optimism.
America is still the great hope of the world in terms of freedom and free enterprise. My confidence about our economy and our country is constantly revived when I consider the amazing good fortune we live with and the equally amazing good sense of the American people.
The latest hiring numbers from the Labor Department say payrolls increased by 150,000 in November. That sounds like an economy revving up to me. So let me go on record and state it clearly: 2004 will be a terrific year for manufacturing, one of the best in our history. The numbers already say so. We will all say so as the year moves on. Our new Secretary of Manufacturing would be saying that right now — if we had one.
Happy New Year!
George Weimer, contributing editor, [email protected]